Some Clean-Energy Loans Raise Flags

WSJ's Ryan Tracy reviews the Department of Energy's 32 renewable energy loan-guarantee project, 10 of which are on an internal 'watch list' because of possible violations. (Photo: Reuters/Kimberly White)

By

Ryan Tracy

Updated March 23, 2012 12:15 pm ET

The Department of Energy has placed nearly one-third of its clean-energy loan portfolio on an internal "watch list" for possible violations of terms or other concerns, according to a copy of the list obtained by The Wall Street Journal, highlighting how such concerns have spread beyond the now-bankrupt Solyndra LLC.

The redacted copy, released in response to a Freedom of Information Act request by the Journal, showed that as of Feb. 29 there were 10 projects on the watch list out of 32 loans and loan guarantees made to electric-vehicle and renewable-energy companies.

The department declined to name the companies on the watch list, saying information about specific loans is confidential. It wasn't clear how much funding the 10 projects received.

Overall, the clean-energy loan program has doled out roughly $8.3 billion, according to a Jan. 31 report by Herb Allison, a former Treasury Department official and Wall Street executive who was commissioned by the White House to review the program after Solyndra's bankruptcy filing.

Loans get placed on the watch list because they have been "identified as higher risk," Mr. Allison said in his report. Reasons for making the list include breaching loan terms, falling behind on agreed-upon performance milestones and being part of "an industry or market sector experiencing challenging market conditions," the report said.

Energy Department officials said loans also could be placed on the watch list for benign reasons—for example, if staff knew an important deadline was approaching—and that being placed on the list wasn't necessarily a precursor to financial problems.

The department has been seeking to limit taxpayer losses by cutting off funding to companies as warning signs arise.

That didn't happen with the loan program's first deal, a $535 million loan guarantee to solar-panel maker Solyndra. Its bankruptcy filing left taxpayers on the hook for nearly all of that amount.

Obama administration officials say it isn't surprising to see some setbacks because Congress designed the program to back high-risk projects, and the Energy Department has aside nearly $3 billion so far to cover potential losses. Electric-vehicle and renewable-energy companies in the program generally have trouble obtaining private-sector funding to commercialize their projects.

Recently, several companies in the program disclosed their projects aren't advancing as planned.

Earlier this week,
Prologis Inc.,
PLD 0.18%
which secured a $1.4 billion loan guarantee almost six months ago to put solar panels on distribution warehouses, said it hasn't installed any solar arrays and would miss a May target for bringing the first solar modules online.

The company said it hasn't drawn down any federally backed funds and is pursuing contracts to sell the power before it installs any panels.

Prologis originally intended to use Solyndra's solar panels. Energy Secretary Steven Chu intervened last summer to help move the loan forward and called the Prologis project "remarkable" when it closed Sept. 30.

Two of the 32 loan recipients—Solyndra and Beacon Power Corp.—have filed for bankruptcy protection and had their deals restructured, making them likely to be among the 10 loans on the watch list.

Hybrid-car maker Fisker Automotive Inc. also may be on the list. The company said on Feb. 6 that the Energy Department had frozen further drawdowns on a $529 million federal loan after the company missed performance targets.

Fisker has received $193 million and said it was negotiating with the department to resume borrowing. A Fisker spokesman said the company doesn't know if it is on the list.

And on Feb. 29 Abound Solar, a Loveland, Colo., solar manufacturer in line for $400 million in U.S.-guaranteed loans, said it was laying off 280 workers and delaying a new factory that was to be backed by the funding. The company has drawn down about $70 million so far. Abound didn't respond to a request for comment.

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Some Clean-Energy Loans Raise Flags

The Department of Energy has placed nearly one-third of its clean-energy loan portfolio on an internal &quot;watch list&quot; for possible violations of terms or other concerns, according to a copy of the list obtained by The Wall Street Journal, highlighting how such concerns have spread beyond the now-bankrupt Solyndra LLC.